Piecing It All Together 82 nd Legislative Regular and Special Session Review

1. Piecing It All Together82nd Legislative Regular and Special Session Review Moak, Casey & Associates July 2011 Moak, Casey & Associates

2. Agenda • Where We Started • School Finance • Other Education Issues • What the Future Holds • Questions Moak, Casey & Associates

3. Developments since 2009 • School Finance Study unsuccessful • 2010 elections – the Conservative takeover • Assessment/accountability plan • Comptroller Efficiency study • Eissler/ERG efficiency model • Barrage of attacks over staffing, performance, cost increases and perceived inefficiency Moak, Casey & Associates

4. Emerging Budget Crisis • Use of federal revenues for current operations • State fund balances not replaced • Recession impact on sales tax • Structural deficit • No new revenue policy—no new taxes • Limited leadership response • Initial $12 billion cut below current commitment Moak, Casey & Associates

5. School Finance

6. The 2010-11 State Budget Deficit • The 2010-11 state budget had a deficit of $4+ billion • Leadership instituted a series of agency cuts prior to the legislative session • The Legislature enacted those reductions and voted to use Rainy Day Fund to fill hole: • HB 4 by Pitts: enacts agency cuts and reduces 2011 appropriations by almost $800 million, including $90+ million to public education • $550 million was appropriated in this bill to offset any additional FSP costs in the 2010-11 biennium • HB 275 by Pitts appropriates $3.2 billion from the Economic Stabilization Fund Moak, Casey & Associates

7. Rainy Day Fund (Economic Stabilization Fund) • Created in 1988, RDF receives • 75% of oil and gas revenue that exceeds 1987 level • 50% of unencumbered GR fund balance at end of biennium • Projected amount in RDF by August 2013: $9.7 billion • 82nd Legislature used: $3.2 billion • Remaining amount: $6.5 billion • Medicaid commitment (informal) $4.8 billion • Howard amendment defeated Moak, Casey & Associates

8. Revenue Measures * *Mostly one-time measures that will not generate revenue in future years Moak, Casey & Associates

9. FSP Funding (All Funds) • When looking at just the funding level for the FSP (Operations and Facilities), the 2012-13 amount totals $35.4 billion,a $1.8 billion decrease compared to 2010-11 • However, this amount is $4 billion below what is required to fund Current Law formulas *Takes into account the $800 million FSP adjustment in Article IX and the August payment delay Moak, Casey & Associates

10. Program Cuts and Reductions In addition to underfunding the FSP, the Legislature made over $1.3 billion in cuts to programs and grant funding: • $271 million, Technology Allotment • $223.3 million, Pre-Kindergarten Grant Program • $269.7 million, SSI ($23.5m remains for 2012-13) • $345.1 million, DATE ($40m remains for 2012-13) • Up to $5m for implementing standards on educator quality • Up to $10m for an educator mentor program • Up to $1m for Humanities Texas • $50 million, New Instructional Facilities Allotment Moak, Casey & Associates

11. Programs Eliminated Other programs eliminated: • $35 million, Science Lab Grants • $20 million, Middle School PE Grants • $14.1 million, Optional Extended Year • $10 million, School Bus Seat Belt Program • New Round of Instructional Facilities Allotment • Property Value Decline Protections • ADA Decline Protections Moak, Casey & Associates

12. Programs Funded • $25 million, Service Centers ($40.7m in 2010-11) • New funding system: two-thirds of funding most flow based on geographic considerations and districts serving less than 1,600 students • Sunset in 2015 • $3.5 million, Campus Intervention and Campus Turnaround Teams ($1.5 million in 2010-11) • Up to $1.5 million of which is for the development of financial and productivity tools Moak, Casey & Associates

13. Programs Funded, cont’d. • $20m, Communities in Schools ($32m-2010-11) • $13.8m, AP Incentives ($19.7m-2010-11) • $17m, JJAEPs ($22.9m in 2010-11) • $8m, Teach for America ($8m in 2010-11) • $8m, Virtual Schools ($20.3m in 2010-11) • $6m, Early College High School and TSTEM • $1.3m, Steroid Testing ($2m in 2010-11) Moak, Casey & Associates

14. The Truth of the Matter • For the first time in 60 years, the legislature failed to finance current law • Foundation Program current services state aid was decreased by $4 billion • Special Program financing was decreased by $1.3 billion • The total decrease was $5.3 billion when the cost of enrollment growth, property value decline, and other factors is taken into account Moak, Casey & Associates

15. What does this mean for LISD There is an approximately $22 million reduction in state funds (from current law) for 2011-12; For 2012-13—a reduction of $32 million Moak, Casey & Associates

16. How will LISD Respond • About 85% of the LISD Operating budget is in personnel; • To achieve a balanced budget for 2012-13 the district will need to reduce staff even more. • Class sizes could go up and other programs redirected or restructured. Moak, Casey & Associates

17. Special Program Allotments • Directs the SBOE to adjust special program spending requirements to align with overall reductions in FSP revenue for special education, compensatory education, bilingual education, career and technology Moak, Casey & Associates

18. Education Jobs Funding • $830 million • SB 1 states TRS may not consider salaries of personnel paid wholly or partly from the Education Jobs Fund distributed to school districts as being paid from federal funds • Legislature used funding to portray offset to cuts in first year of biennium • LISD used the Jobs monies to reduce the deficit for 2010-11. Moak, Casey & Associates

19. Property Taxes • What didn’t happen • Tax rate elections • Debt service issues for high I&S tax rate school districts Moak, Casey & Associates

20. Tax Rate Elections (TREs) • Not affected by any school finance bills (so far) • Secretary of State rules Election Code trumps Tax Code unless a special exception exists Moak, Casey & Associates